David Cummings on Startups

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  • Who, What, Why, and When of Accountability

    One area many entrepreneurs struggle with, especially first-time entrepreneurs, is holding team members accountable. Many entrepreneurs are so focused on whatever it is they do well (e.g. sales, product management, fundraising, etc.) that they naturally neglect the operating side of the business. This can be OK early on but as the startup grows, and the number of people on the team grows, it becomes a real challenge.

    A simple exercise is to make a Google Sheet answering the Who, What, Why, and When of accountability:

    • Who – Who is responsible for this (the name of the person — make it one person and not multiple people)?
    • What – What is it that this person must do?
    • Why – Why is this important for the organization?
    • When – When is this due (make it a fixed date or a recurring event e.g. these KPIs need to be put in the spreadsheet every Friday by 2pm)?

    Much like the Weekly Team Update email, developing basic business processes is critical as the business scales. For entrepreneurs struggling with accountability, implementing a simple system that answers the who, what, why, and when questions can really help.

    What else? What are some more thoughts on the who, what, why, and when of accountability?

  • Weekly Team Update Email

    One of my favorite business communication and accountability tools is the weekly team update email. As simple as it sounds, when done well, it helps align everyone in the company and provide visibility into the most important metrics. Here’s a simple template for a weekly team update email:

    • Intro
      • Quick paragraph summary of last week
    • Annual Goals
    • Quarterly Goals
    • Quarterly Priority Projects
    • Sales
      • The top three weekly metrics for the sales team, or for smaller teams, the top three metrics for every person on the sales team (e.g. calls, appointments, deals won, new recurring revenue, etc.). By having every sales rep listed with their metrics, it provides transparency and peer-pressure to hit their numbers.
      • Comments or highlights from last week (e.g. the name of a big customer win or story from the team)
    • Marketing, Services, Support, Engineering, Operations, etc. (each has their own section, just like the Sales section)
      • The top three weekly metrics
      • Comments or highlights from the week
    • Culture Highlight
      • A story or example from the week that exemplifies the company culture and recognizes one or more people

    In more sophisticated companies, not only will the CEO send out a weekly team update email to the entire company, but the leader of every department will send a department-specific update to their respective team.

    One weekly email, while not trivial to make, is incredibly valuable for accountability, alignment, and visibility throughout the company. And, it’s also good to include investors, advisors, and mentors on the email.

    For entrepreneurs thinking about 2016 New Year’s resolutions, add weekly team update email to your list and become a better leader.

    What else? What are some more thoughts on the weekly team update email? Also, let me know if you want more details on our process to auto-generate these emails.

  • Applied Analytics with Business Processes + Big Data + Information Rights

    Georgian Partners has codified an interesting set of ideas around applied analytics as part of their core investing thesis. Generally, the idea is that B2B tech companies that provide a core business process (e.g. CRM, help desk, etc.), with the permission of their users to anonymize the data (information rights), can apply big data analysis to come up with meaningful insights to help customers get more value than they otherwise would from a basic tool. Meaning, the more customers that use a given application, the more valuable the app is to those customers because it can provide insights from across the customer base to any given customer.

    Here are the 11 principles from the applied analytics theory:

    1. Understand the entire process
    2. Identify and prioritize the most valuable insights
    3. Create a dataset that is unique and broad
    4. Raw data is of little or no value
    5. Insights are more valuable the closer they are to being actionable
    6. Leverage the shortage of data scientists to your advantage
    7. Separate analytical insight from how it’s consumed
    8. Inject insights into business processes at the moments of highest impact
    9. It’s not about ‘owning’ the data
    10. Governance and compliance is a foundational discipline
    11. Lead by example

    As a simple example, imagine an email marketing company with 50,000 customers. Using the dataset, the application can proactively notify users when they use words that are likely to trigger spam filters or provide a visual analysis of email open and delivery rates compared to similar customers. By proactively helping customers be more effective in an automated fashion, the company is actually creating a moat around the business that new upstarts will have a hard time duplicating (you can’t duplicate it unless you have a critical mass of customers, and it’s incredibly difficult to achieve that scale).

    For entrepreneurs in B2B tech, they’d do well to read the applied analytics theory.

    What else? What are some more thoughts on applied analytics with business processes, big data, and information rights?

  • Differing Corporate Cultures and Success

    Back in the early Pardot days we defined our core values as positive, self-starting, and supportive. These values were used extensively in our hiring process, quarterly check-ins, and the day-to-day running of the business. Only, we had an arch enemy competitor that was cut-throat, aggressive, and, generally, the antithesis of our style. Yet, both companies were wildly successful.

    HBR has an article up titled Proof That Positive Work Cultures Are More Productive where the author cites data supporting the Pardot-style as being more productive. Yet, organizations like Oracle are well known for their aggressive culture, while still being incredibly successful. How can cultures with completely different styles be so successful?

    The answer: whatever the culture, it needs to be cohesive throughout.

    If some people are cut-throat and inconsiderate while others are positive and self-starting, that’s going to be a challenging culture. If everyone is cut-throat, and that culture is cohesive, it’ll be able to succeed. A popular business book titled The No Ass Hole Rule, which argues bullying behavior hurts morale and productivity, cites Steve Jobs as a prime example, but we know how successful Apple became under his leadership. Apple has strong values and a cohesive culture.

    There’s no one “right” culture — there are too many different, successful companies with varying cultures. What’s important is that entrepreneurs make a focused effort on building a great culture that’s cohesive and strong in their own style.

    What else? What are some more thoughts on differing corporate cultures and success?

  • Video of the Week: Jack Dorsey Interview

    With the recent Square IPO (NYSE:SQ, S-1 IPO notes), Jack Dorsey solidifies his place as one of the most successful serial entrepreneurs of recent memory. Jack is currently the CEO of Twitter (market cap: $17 billion) and the CEO of Square (market cap: $4 billion) simultaneously. For this week’s video, hear his background and the origin story of two billion dollar companies well before they achieved tremendous success.

    From YouTube: In this series premiere of Foundation, Kevin Rose interviews Jack Dorsey, the creator, co-founder and chairman of Twitter and the CEO of Square. The conversation talks of entrepreneurship, decision making, trial and error, and the path Jack took that lead to the creation of Twitter and Square.

  • 7 Questions Investors Ask After a Pitch

    Bing Gordon, a General Partner at Kleiner, has a great post up titled How To Craft A Concise Pitch Investors Will Care About. Entrepreneurs spend a tremendous amount of time on their executive summary, but not enough time thinking through things from the investor perspective. One place to start is by thinking through questions investors will ask each other after the pitch.

    From the article, here are seven questions investors ask after a pitch:

    • Do you seem like a great entrepreneur?
    • Who is the competition and how do you stack up?
    • What are your team’s assets?
    • What have you accomplished to date?
    • How well have you managed your resources?
    • How big is the market you are targeting?
    • How protected can your business be?

    Entrepreneurs would do well to go through these investor questions in advance of a pitch and think through how the answers will be assessed.

    What else? What are some other questions investors ask after a pitch?

  • Defining the Ideal Customer Profile

    Earlier today I did a live SaaStr AMA talking about sales and marketing alignment, among a number of other topics. One of the first conversations was on defining the ideal customer profile. As for startups, early on there’s a good bit of trial and error to find any customer that’s interested. Over time, as the business grows, patterns start to emerge and the ideal customer profile becomes apparent. One of the best things an entrepreneur can do is really narrow down their definition of the ideal customer profile.

    At Pardot, we spent years refining our ideal customer profile. By 2012, here’s what our ideal customer profile looked like:

    • Company with 20-200 total employees
    • 5-50 employees in sales and marketing
    • At least one full-time, in-house marketing person
    • Buys Google AdWords for direct response lead generation
    • Has an email newsletter sign-up box on their website
    • Closes deals with a consultative sales team

    By maintaining a tight focus on companies that fit our ideal customer profile, we were able to make our outbound prospecting and marketing much more successful. Spend time refining your ideal customer profile — it’ll be worth it.

    What else? What are some more thoughts on the ideal customer profile?

  • The $5M Number for Growth Stage VCs

    Earlier today I was talking with a growth stage VC about some of the fast-growing startups in Atlanta. Naturally, I asked what minimum revenue number he looks for in order to qualify as a growth stage investment and he gave the expected response: $5 million. I don’t know when $5 million became the standard for growth stage startups but it’s incredibly common now. Now, the bigger question is why did these professional money managers arrive at the $5 million revenue minimum in the first place?

    Here are a few thoughts on the $5 million revenue minimum for growth stage VCs:

    • Market Size – If the startup got to $5 million in revenue pretty quickly, there’s a great chance that they can get to a size and scale many times that (e.g. if they can get to $5 million, they should be able to get to $50 million). Of course, the overall market opportunity needs to already be large, and/or fast growing. My personal favorite is small markets that are growing fast.
    • Customer Base – Assuming it’s not a handful of six and seven figure customers, $5 million in revenue means that there’s a large number of customers (e.g. at least more than 100) representing a diversified customer base. VCs like looking at segments, cohorts, and other types of customer data to then extrapolate what could be with an accelerated trajectory.
    • Team – By $5 million, it’s likely the startup has 30+ employees (if not more), meaning there will be some or all of a management team in place, a defined corporate culture, and a “feel” about the inner workings of the business. VCs look for patterns from previous investments, and it’s easier to get a feel for things when there are apparent similarities (e.g. a sales-oriented culture or a maniacal customer focus).

    It goes without saying that even though $5 million is the minimum revenue amount, the startup also needs to be growing fast, super fast — a slow growth $5 million startup isn’t going to be interesting. The next time you talk to a VC, ask them what stage they like, and the minimum revenue amount for that stage. If they say growth stage, it’s likely a $5 million revenue minimum.

    What else? What are some other reasons growth stage VCs make $5 million in revenue their minimum?

  • Growth Frameworks and Functions

    First Round has a great article up about Indispensible Growth Frameworks based on the lessons learned from Andy Johns. The idea is that once a startup reaches a certain size, they should have a dedicated person or team focused on growth (e.g. a VP of Growth). Growth, in this example, means the flow of customers into and out of a product. Basically, anything related to getting users in the product.

    Here are a few notes from the article:

    • Basic Growth Equation
      • Top of Funnel (traffic, conversion rates)
        x
        Magic Moment (create emotional response)
        x
        Core Product Value
        =
        Sustainable Growth
    • Amazon’s Growth =
      • Vertical Expansion
        x
        Product Inventory Per Vertical
        x
        Traffic Per Product Page
        x
        Conversion to Purchase
        x
        Average Purchase Value
        x
        Repeat Purchase Behavior
    • Develop rigorous experimentation methods.
    • You can’t sustainably grow something that sucks.
    • You don’t need or want a growth hacker to lead.
    • Your growth lead needs to be a product person.

    The article is focused on B2C internet entrepreneurs but the general idea remains: have a dedicated person or team focused on acquiring leads or users and continually test and optimize the funnel.

    What else? What are some other thoughts on growth frameworks and growth functions in a startup?

  • Planning for 2016

    Earlier today I was talking to an entrepreneur and the topic of planning for 2016 came up and he lamented that he hasn’t gotten around to it yet. While many mid-to-large companies are already deep into their 2016 planning, most early stage entrepreneurs I know haven’t done it yet. Well, now’s the time to get going and plan for 2016.

    Here are a few recommendations for 2016 planning:

    Personally, I always enjoy the planning process as it’s a great time to step back and think about the big picture opportunities ahead and what it’ll take to get there. It’s critical to find time to work on the business.

    What else? What are some other recommendations for the annual planning process?